A dedicated server is a must for any serious webmaster these days. Dedicated servers offer more freedom and control than shared hosting, and tend to offer more performance and stability than shared hosting too.
Sadly, this kind of hosting can be expensive. Between shared hosting and dedicated servers, there’s an option called a Virtual Private Server (VPS). A VPS behaves like a real computer in that you have control over the operating system, what is installed on it, and how it is configured, but your setup isn’t the only one running on the hardware – there are other virtual machines competing for resources. If you’re just getting started a VPS is an inexpensive way to try your hand at running a server, but successful websites can outstrip the power of a VPS quite quickly.
The hosting itself can be managed, or unmanaged. A managed box is looked after by the company that hosts it. So you don’t have to worry about security, software updates, or configuration. This is a good option for webmasters that don’t want to have to worry about anything other than maintaining and updating their own websites.
Unmanaged boxes are the exact opposite. The hosting company will run the hardware for you, and connect your box to the internet – but you’re responsible for keeping it up-to-date, secure, and running smoothly. This option is less expensive in terms of monthly fee – but could be expensive in terms of the time you spend looking after the machine.
If you have the skills and time to run an unmanaged Linux box (most hosting of this type is Linux or BSD), or the desire to learn, then you can save some money doing so, and have a lot of fun getting the operating system and software running exactly the way you like it.
You can run several websites using just one dedicated server, and even use it for other services; for example TeamSpeak, or services for games, if you have enough system resources for that. The possibilities are endless.